economy
The Fed will have to raise interest rates in July to appease 'bond vigilantes,' Yardeni says
Sent to the Federal Reserve to lower interest rates, incoming Chair Kevin Warsh instead may have to push for higher levels.
TL;DR
- Incoming Fed Chair Kevin Warsh may need to raise interest rates to gain credibility, according to market veteran Ed Yardeni.
- Treasury yields have surged, with the 30-year bond reaching its highest in nearly a year, due to market concerns over inflation.
- Yardeni believes Warsh should signal a tightening stance, possibly by removing forward guidance or even hiking rates in July, to appease 'bond vigilantes' and manage borrowing costs.
- Current market pricing shows a low probability for a July rate hike, contrasting with Yardeni's prediction.
- A hawkish stance from Warsh could help lower real-world borrowing costs, benefiting mortgages and corporate financing.